Today, we are witnessing a massive change in national and global business environments. But what's behind this shift in perspective? How does our commitment to the Paris Agreement affect our businesses? One thing is for sure, we are looking for new ways to meet the future legislation, accelerate emission reductions, and reduce environmental impact of both our products and business ecosystems. Great new opportunities for investors are opening up. However, in order to seize these opportunities, you need to know who your stakeholders are and how they can influence your products along the way. Let's begin with those three stakeholder types who are especially important for you and your company while striving for innovation. Our first group of stakeholders are companies and entrepreneurs. They are the ones who come up with various innovations and find new solutions to address new market opportunities. Also they are the ones who can take advantage of key trends the most, key trends such as digitalization, more accessible, sustainable energy, and exponential price reductions when it comes to key technologies. The second category of stakeholders is customers and their demands. Sourcing and supply chains are contributors to our successful adaptation to new sustainable business conditions. The pool come from both public demand and business procurement. Yet, it's worth keeping in mind that business customers need to act more responsibly when it comes to their stakeholders as well as to their shareholders. The third group of stakeholders are the investors. By definition, they search for limited risk and future winners. Therefore, they increasingly see nonsustainable businesses as strategic risks, simply because they no longer respond to stakeholders and governments demands and requirements. Of course, one of the most important shared perspectives of companies and investors is still their interest in profitability, even when it comes to sustainable investments. For Vattenfall, when we look at how we create value, we know that we are part of society, and we even say in our strategy that sustainability is the business and sustainability is the starting point for everything that we do. Thereby, we do automatically look at both environmental, social, and financial aspects, and we look at it both from an owner perspective, but also how we're adding value to all the different stakeholders. How should we develop and present our projects to decision-makers? Let's take an interesting study made by Michael L. Barnett from Said Business School in Oxford and Robert M. Solomon from Stern Business School in New York. They gathered data from more than 1,200 companies in the period between 1998 and 2006 to examine the relationship between corporate social performance and corporate financial performance. What they found was a U-shaped correlation indicating that the first investments tend to be costly, but the more investments are made and actions are taking, the better the financial performance becomes. This clearly suggest the need for such a strategy that also incorporate social performance such as sustainability in a way where you're not working with sustainable investments as an add-on, but as an integrated part. I often get the question, what are the challenges in ensuring that sustainability is part of your business development? I say, the key to that is the way that we've done it in Vattenfall. When I entered as head of sustainability, I said, "I want to throw out the sustainability strategy and sustainability targets, and rather flip the coin and say, the starting point for our strategy should be sustainability." That's exactly the way we've done it. Sustainability is the business, that's the first line and our strategy. If you truly incorporate sustainability into your decision-making, your strategy, etc, then it will be a natural part of the way that you innovate. But if you keep it as a silo at the side, it's never going to happen, and that's when you have the struggle. So my advice is just integrate it and be true to it, keep it at the heart of the business. Today, customer demand face strategic shift from product to value and usage. Most customers are used to traditional ownership, yet the shift in mindset and habits, in other words, from owning a product to securing access to the value it provides, has clearly began. This shift is not only based on environmental concerns, but also has an obvious economic benefit for individual customers and for society as a whole. Its Impact, which was most limited to the IT industry for more than 10 years since Software as a Service became a common solutions for business and customers, has now become tangible in other industries as well. What is value? Let us take an example from the car industry. The value of a car is transportation it offers in different segments, and not the ownership of the product. Nothing shows it more clearly than the emergent service from car-sharing services. For a longtime, truck companies such as Volvo and Scania, have been focusing on uptight productivity feature, while both layer reliability and accessibility are important for customers. However, they have recently started considering a more important value, the decrease in the cost and impact of city logistics. Then your focus reflects the shift from offerings to a product solution, or in a system solution and even societal solutions, which we will cover in later chapters. This changes the development process as well. The perspective, the value for the customer is becoming more important than ever. In order to understand the value of an offering, there is an increased need for understanding of the usage of the product from a sustainable perspective. What is the difference between traditional and value-based product development then? The traditional product development is based on the following steps: Creating a product through product design and process design, sometimes with a life cycle perspective. Producing a product with procurement, production, and services as resources and cost efficient as possible. Then selling a product, marketing, and distribution, and sales, sometimes with the responsibility of a recycling. Product development has normally aimed at making the product more efficient or making sure that customers are provided with a specific solution. However, when delivering value, we should take a starting point in other activities than in product sales so we can create the right offering and meet the right customers in the right way. The process to develop value-based offerings is different. As we start from the sustainable value created for the customers, we select segments and assign the offering accordingly, and last, we visualize the value for the customer. It's important to think about what could and should be done, and how far companies should go in the customer decision. As for the digital part of the offering, we can find significant different there as well. In a traditional offering, digitalization is more of an add-on, whereas in a value-based offering, it's often an integrated part of the core and vital for making the offering sustainable, both for, example, predictive maintenance, or by visualization, and testing a digital twin.
